The Bank of Japan Policy Board decided Friday on new steps for enhancing corporate financing amid pressure to enhance liquidity in capital markets and relieve the nation's credit squeeze.
The decision, adopted by a majority vote of the board's nine members, reflects the central bank's concerns that corporate financing is continuing to deteriorate and that private banks should be prodded into lending companies sorely needed funds.
Meanwhile, the BOJ's monetary policy was left unchanged at Friday's meeting; the bank will continue to guide the unsecured overnight call money rate from slightly below 0.5 percent down to around 0.25 percent on average. Also, the official discount rate will remain unchanged at 0.5 percent.
Under the new measures, the BOJ will further utilize its commercial paper purchase operations. Beginning Monday, the bank will expand the scope of commercial paper eligible for its purchases and speed up the screening process for issuing companies, BOJ officials said.
In addition, the central bank intends to add corporate bonds to the list of permissible collateral in the future. The BOJ's plan is to introduce a temporary financing scheme by mid-December that will provide ample market liquidity so firms can overcome their fundraising difficulties toward the end of the fiscal year, the officials said.
The BOJ will finance up to 50 percent of the loans extended by private banks between October and December, on the condition that only banks that have moved to increase lending during these months over September's levels will be able to participate, the officials said.